[Tom Gellrich, Markus Holzhäuser, Universität Frankfurt]

This presentation examines vertical integration and its impact on profitability and shareholder value in the global banking industry. We derive a measure for vertical integration using a sample of 859 banks from 10 Anglo-Saxon and European countries covering the timeframe 1997-2002.
Our results suggest that banks either operating on highly integrated or highly disintegrated levels of vertical integration display superior performance figures and stock market evaluations. Additionally, vertically integrated banks show lower levels of firm risk.
As our results suggest an interrelation between vertical integration and outsourcing, banks need clear determined strategies whether to engage into outsourcing activities or not.